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Specialists in Shipping, Marine Insurance & Transit Law, London |
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Winter Newsletter 2004/5The year 2004 came to an end with the customary round of meetings of committees and working parties concerned with salvage and related activities. SCOPICThe Special Compensation P&I Club clause, better known as ?SCOPIC?, was introduced five years ago. It has succeeded in its aim to provide a practical system for rewarding the contractor who renders salvage assistance to a vessel that threatens damage to the environment. In the vast majority of such cases Article 14 of the Salvage Convention 1989 has ceased to have any relevance. With the benefit of the reports made by the attending Special Casualty Representative, or ?SCR?, the contractor?s entitlement to ?special compensation? can be assessed by reference to the tariff rates for personnel, vessels, plant and equipment set out in appendix A to SCOPIC. In the event of disagreement the contractor?s SCOPIC claim can be determined by an arbitrator appointed by Lloyd?s, but only five of the one hundred and thirteen SCOPIC claims made in the five years up to October 2004 have resulted in an arbitration; the remainder were settled. All sides of the salvage industry recognise, however, that SCOPIC needs to be kept up to date. An annual review is undertaken by the Salvage Liaison Group by reference to reports and recommendations made by sub-committees, principally the SCR Committee. At the 2004 review a number of amendments were agreed which have been incorporated in SCOPIC 2005, a revised version of the agreement that became operative from 1 January 2005. The full text of SCOPIC 2005 can be found via the link on this website to Lloyd?s Salvage Arbitration Branch. Most of the alterations in the SCOPIC wording are grammatical in nature and of no great consequence. However, there are two amendments of substance. First, there is a new sub-clause 5(iii)(c). This reads: ?Any out of pocket expense incurred during the course of the service in a currency other than US dollars shall for the purpose of the SCOPIC clause be converted to US dollars at the rate prevailing at the termination of the services.? This addition was thought necessary as there was no provision in SCOPIC that dealt expressly with the need to convert into US dollars any expenses the contractor had incurred in a different currency. The need for the second amendment of substance is to be found in those cases in which the contractor is entitled to an Article 13 salvage award, but has also invoked SCOPIC because, for example, the value of the salved property may not prove sufficient to ensure that the contractor recovers his out-of-pocket expense. In such cases SCOPIC remuneration is only payable to the extent that it exceeds the Article 13 award, and where the Article 13 award is greater than the SCOPIC remuneration 25% of the difference between the two figures falls to be deducted from the salvage entitlement. Clauses 6(i) and 7 in SCOPIC 2000 provided that this set off was to be made ?after currency adjustment but before interest and costs?. It has become apparent, however, that this can produce unfair results where, for example, the salvage award has been substantially ?uplifted? (to reflect the altered value of the contractor?s currency as against the currency of payment) - thereby causing the Article 13 award to exceed the SCOPIC remuneration. It has been agreed, therefore, that in sub-clauses 6(i) and 7 the words: ?after currency adjustment but before interest and costs? should be altered to read: ?before currency adjustment and before interest and costs?. These amendments were agreed without much difficulty. However, a request by the International Salvage Union, the representatives of the professional salvage contractors, for a 15% increase in the tariff rates for salvage personnel proved much more controversial. In the event, agreement could only be reached on improved rates for diving services. In clause 1(a) of appendix A the word ?diver? has been replaced by the words: ?HSE qualified diver or his equivalent (but excluding saturation or mixed gas divers whose rate should be agreed with the SCR or determined by the arbitrator)? - and the daily tariff rate for such a diver has been increased from US$750 to US$900. LLOYD'S FORM OF SALVAGE AGREEMENT (LOF).At its annual meeting the LOF Working Party was told that only seventy-one LOF contracts had been notified to Lloyd?s, and that there was therefore a possibility that the total for 2004 would be less than the previous year?s total of eighty-nine (which was itself the lowest total ever recorded). In the event, however, a late surge in LOF salvage activity produced a year-end total of ninety-one. The downward trend that has characterised the statistics for the last few years was therefore reversed. Since its establishment, the annual meeting of the LOF Working Party has been held in the latter part of the year. Property underwriters have, however, drawn attention to the fact that the need for negotiations for the renewal of insurances expiring on 31 December means that that period is the busiest time of the year for them. It has therefore been agreed that the next meeting will take place in March 2005. It has also been agreed that it would make sense to combine the LOF Working Party with the Salvage Liaison Group. The merged body will be known as the Lloyd?s Salvage Group and its first meeting in March will be chaired by Nigel Teare Q.C.. Mr Teare is the Lloyd?s appeal arbitrator, and determines all appeals from salvage awards made by an original arbitrator appointed by Lloyd?s. The number of original arbitrators varies but, for the past few years, has consisted of five leading members of the admiralty bar. Traditionally, members of this panel have felt free to appear as counsel in any LOF arbitration in which they have not been appointed as arbitrator. However, Lloyd?s concern to ensure that the LOF arbitration regime retains the absolute confidence of underwriters, property owners and salvage contractors alike has resulted in a decision that Lloyd?s will not in future appoint as arbitrator any member of the panel who wishes to retain the right to act as counsel in LOF arbitrations. It is expected that this decision will result in the number of original arbitrators being reduced from five to three. Time will tell whether three original arbitrators will be sufficient. Nevertheless, progress is being made with a plan to introduce a set of guidelines to encourage the greater use of a simplified arbitration procedure that will enable the smaller LOF cases to be resolved without the need for a formal hearing before the appointed arbitrator. The entitlement to conduct an arbitration on documents alone is already built into LOF 2000. However, the proposed guidelines will go much further. They will, for example, impose limits on the quantity of evidence that can be adduced. The length of any written submissions that may be given to the arbitrator will be similarly restricted. The most radical feature of the guidelines, however, will be the imposition of limits on the amounts payable in respect of not only Lloyd?s and arbitrator?s fees but also the recoverable legal costs ordinarily awarded to the contractors. The definition of the ?smaller? case that will attract the application of the guideline procedures is one of the details that are still the subject of discussion. Nevertheless, there is every reason to expect that the guidelines will be finalised at the March meeting of the Lloyd?s Salvage Group. LITIGATION OR ARBITRATION?Sadly, these efforts to reduce the cost of arbitration in the UK are not replicated in the activities of the governmental agency that determines the fees payable for the use of the services provided by the courts. The swingeing increases in court fees that were introduced on 4 January 2005 are a reflection of the government?s policy that the cost of the court services should be borne by the litigants who wish to use those services for the resolution of their disputes, rather than the general taxpayer. The magnitude of the increases is such, however, that potential litigants will be well advised to give greater consideration to mediation, arbitration or some other form of dispute resolution before embarking on litigation in the High Court. For example, the court fee payable on the issue of a claim form relating to a money claim which is either over ?300,000 or for an unlimited sum has increased by more than 100% to ?1,700. Unhappily, things will get worse. From April 2005 a court fee of ?200 per hour will become payable throughout the trial of any action in the High Court or any hearing in the Court of Appeal. The statistics for 2003-04 show that the number of trials in the Commercial Court was almost one-third fewer than the previous year. That statistic is almost certainly explained by the success of mediation and other alternative dispute resolution procedures, the popularity of which can only be boosted by such substantial increases in court fees. Return to News |
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